[Code of Federal Regulations]
[Title 29, Volume 9]
[Revised as of July 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR2580.412-5]

[Page 596-597]
 
                             TITLE 29--LABOR
 
 CHAPTER XXV--EMPLOYEE BENEFITS SECURITY ADMINISTRATION, DEPARTMENT OF 
                                  LABOR
 
PART 2580_TEMPORARY BONDING RULES--Table of Contents
 
          Subpart A_Criteria for Determining Who Must Be Bonded
 
Sec. 2580.412-5  Determining when ``funds or other property'' belong 
to a plan.

    With respect to any contribution to a plan from any source, 
including employers, employees or employee organizations, the point at 
which any given item or amount becomes ``funds or other property'' of a 
plan for purposes of the bonding provisions shall be determined as 
described in this section.
    (a) Where the plan administrator is a board of trustees, person or 
body other than the employer or employee organization establishing the 
plan, a contribution to the plan from any source shall become ``funds or 
other property'' of the plan at the time it is received by the plan 
administrator. Employee contributions collected by an employer and later 
turned over to the plan administrator would not become ``funds or other 
property'' of the plan until receipt by the plan administrator.
    (b) Where the employer or employee organization establishing the 
plan is itself the plan administrator:
    (1) Contributions from employees or other persons who are plan 
participants would normally become ``funds or other property'' of the 
plan at the time they are received by the employer or employee 
organization, except however that contributions made by withholding from 
employees' salaries shall not be considered ``funds or other property'' 
of the plan for purposes of the bonding provisions so long as they are 
retained in and not segregated in any way from the general assets of the 
withholding employer or employee organization.
    (2) Contributions made to a plan by such employer or employee 
organization and contributions made by withholdings from employees' 
salaries would normally become ``funds or other property'' of the plan 
if and when they are taken out of the general assets of the employer or 
employee organization and placed in a special bank account or investment 
account; or identified on a separate set of books and records; or paid 
over to a corporate trustee or used to purchase benefits from an 
insurance carrier or service or other organization; or otherwise 
segregated, paid out or used for plan purposes, whichever shall occur 
first. Thus, if a plan is operated by a corporate trustee and no 
segregation from general assets is made of monies to be turned over to 
the corporate trustee prior to the actual transmittal of such monies, 
the contribution represented in the transmission becomes ``funds or 
other property'' of the plan at the time of receipt by the corporate 
trustee. On the other hand, if a special fund is first established from 
which monies are paid over to the corporate trustee, a given item would 
become ``funds or other property'' of the plan at the time it is placed 
in the special fund. Similarly, if plan benefits are provided through 
the medium of an insurance carrier or service or other organization and 
no segregation from general assets of monies used to purchase such 
benefits is made prior to turning such monies over to the organization 
contracting to provide benefits, plan funds or other property come into 
being at the time of receipt of payment for such benefits by the 
insurance carrier or service or other organization. In such a case, the 
``funds or other property'' of the plan would be represented by the 
insurance contract or other obligations to pay benefits and would not be 
normally subject to ``handling''. Bonding would not be required for any 
person with respect to the purchase of such benefits directly from 
general assets nor with respect to

[[Page 597]]

the bare existence of the contract obligation to pay benefits. However, 
if the particular, arrangement were such that monies derived from, or by 
virtue of, the contract did subsequently flow back to the plan, bonding 
may be required if such monies returning to the plan are handled by plan 
administrators, officers or employees. (Further discussion on bonding of 
insured plans is contained in Sec. 2580.412-6(b)(7)).